The rationale behind allocating goodwill across a subsidiary's various cash-generating units is:
A) that doing so will result in more accurate asset valuations.
B) that it is necessary to comply with IASB requirements.
C) that doing so would facilitate comparisons between operating segments.
D) that the cash-generating units will benefit from the synergies of the combination.

Question

Quizplus · Accepted Answer

The rationale behind allocating goodwill across a subsidiary's various cash-generating units is that doing so will allow the cash-generating units to benefit from the synergies of the combination. Goodwill represents the excess paid for a subsidiary over the fair value of its identifiable assets and liabilities, and allocating it to cash-generating units allows the units to benefit from any synergies created by the acquisition. This can result in increased cash flows and value for the business as a whole.

The Rationale Behind Allocating Goodwill Across a Subsidiary's Various Cash-Generating